Trading Plan for 5/20
[pay]Pattern notes.
Buyers are no longer at a risk of getting ahead of themselves. I was concerned about this after Monday’s sizable rally, which had already run halfway back to prior highs. Monday night’s higher high was retraced by Tuesday’s open, but intraday price action was attracted higher back to it throughout the day.
The attraction helped to save the first half-hour’s drop from extending, and it produced new session highs going into the last hour. But despite its obvious influence, the overnight high was never retested intraday. Sellers filled the void at Tuesday’s last half-hour, plunging 9 points to finish in negative territory, and another 3 points at the Globex open.
The cash session close was barely above the morning’s low, so it barely avoided damaging the chart. Simply failing to recover from negative territory through the open would keep buyers on defense until just ahead of the afternoon’s FOMC announcement. A bigger break, like under 901’25, could be very different – there are only brief patches of obligatory support on the way down to the gap at Friday’s 883’00 close.
Either way, a weaker open Wednesday could be stepping on egg shells all morning. But not if Tuesday’s late drop is invalidated at the open, by gapping up above 910’00-911’00. Immediate follow-through would be credible for extending higher through the morning to retest Monday night’s high around 916’00.
Any trending attempt will need to gain traction quickly, or else price action could become paralyzed by anxiousness ahead of the afternoon’s FOMC announcement. Its reaction, and the reaction to its reaction, should make up for any interim lack of volatility.
Indicators and Internals.
Both 1-minute and 3-minute MACD & RSI diverged positively when Tuesday’s last-minute low was retested at the Globex open. This didn’t stop the slide from extending 3 more points. At this moment, the slide has been retraced entirely.
Wednesday’s opportunities.
The open can either reject Tuesday’s late decline, or extend it, and any quick follow-through would likely beget more follow-through into late-morning. A flat open – not too strong, not too weak… just right – could be comfortable ranging narrowly until the FOMC announcement nears.[/pay]